Results for “fda reciprocity”
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Senators Cruz and Lee Introduce Reciprocity Bill

Senators Ted Cruz (R-Texas) and Mike Lee (R-Utah) have just introduced a bill that would implement an idea that I have long championed, making drugs, devices and biologics that are approved in other developed countries also approved for sale in the United States. Highlights of the “Reciprocity Ensures Streamlined Use of Lifesaving Treatments Act (S. 2388), or the RESULT Act,” include:

  • Amending the Food, Drug and Cosmetic Act to allow for reciprocal approval of drugs, devices and biologics from foreign sponsors in certain trusted, developed countries including EU member countries, Israel, Australia, Canada and Japan.
  • Encouraging the FDA to expeditiously review life-saving drug and device applications, this legislation would provide the FDA with a 30-day window to approve or deny a sponsor’s application….
  • The HHS Secretary is instructed to approve a drug, device or biologic if the FDA confirms the product is:
    • Lawfully approved for sale in one of the listed countries;
    • Not a banned device by current FDA standards;
    • There is a public health or unmet medical need for the product.
  • If a promising application for a life-saving drug is declined Congress is granted the authority to disapprove of a denied application and override an FDA decision with a majority vote via a joint resolution.

In explaining why he introduced the bill Senator Cruz argued:

We continue to lose far too many of our loved ones to the “invisible graveyard,” as economist Alex Tabarrok has described: lives that could have been saved but for a bureaucratic barrier that rejects medical cures and innovation…The bill I am introducing takes the first step to reverse this trend. It provides for reciprocal drug approval, so that cures and medical devices that are already approved in other countries can more expeditiously come to the U.S.

Burned by the FDA

woman with bad sunburn - isolatedIf you lived in Great Britain or Germany and your physician prescribed a pharmaceutical, would you ask them, “has this pharmaceutical been approved by the U.S. FDA?” Probably not. At FDAReview.org Dan Klein and I argue that international reciprocity is a no-brainer:

If the United States and, say, Great Britain had drug-approval reciprocity, then drugs approved in Britain would gain immediate approval in the United States, and drugs approved in the United States would gain immediate approval in Great Britain. Some countries such as Australia and New Zealand already take into account U.S. approvals when making their own approval decisions. The U.S. government should establish reciprocity with countries that have a proven record of approving safe drugs—including most west European countries, Canada, Japan, and Australia. Such an arrangement would reduce delay and eliminate duplication and wasted resources. By relieving itself of having to review drugs already approved in partner countries, the FDA could review and investigate NDAs more quickly and thoroughly.

Unfortunately, even when they can, the US FDA does not take advantage of international knowledge as the WSJ notes in European Sunscreen Roadblock on U.S. Beaches:

Eight sunscreen ingredient applications have been pending before the U.S. Food and Drug Administration for years—some for up to a decade—for products available in many overseas countries. The applications were filed through the federal TEA process (time and extent application), which allows the FDA to approve the ingredients if they have been used for at least five years abroad and have proved effective and safe.

…Henry Lim, chairman of dermatology at Henry Ford Hospital in Detroit and a member of the American Academy of Dermatology, says multiple UVA filters still awaiting clearance in the U.S. have been used effectively outside the country for years.

“The U.S. is an island by itself on this one,” he said. “They’re available in Canada, available in Europe, available in Asia, available in Mexico, and available in South America.”

The sunscreens available in the U.S. are not without risk and in some ways, as the WSJ discusses, the European standards are stricter than the US standards so there really is no reason why sunscreens available in Europe and Canada should not also be available in the United States.

Hat tip: Kurt Busboom.

Addendum: 27 states have driver’s license reciprocity with Germany. Why not pharmaceutical reciprocity? With hat tip to whatsthat in the comments.

In Conversation with Próspera CEO Erick Brimen & Vitalia Co-Founder Niklas Anzinger

During my visit to Prospera, one of Honduras’ private governments under the ZEDE law, I interviewed Prospera CEO Erick Brimen and Vitalia co-founder Niklas Anzinger. I learned a lot in the interview including the real history of the ZEDE movement (e.g. it didn’t begin with Paul Romer). I also had not fully appreciated the power of reciprocity stacking.

Companies in Prospera have the unique option to select their regulatory framework from any OECD country, among others. Erick Brimen elaborated in the podcast how this enables companies to do normal, OECD approved, things in Prospera which literally could not be done legally anywhere else in the world.

…so in the medical world for instance you have drugs that are approved in some countries but not others and you have medical practitioners that are licensed in some countries but not the others and you have medical devices approved in some countries but not others and there’s like a mismatch of things that are approved in OECD countries but there’s no one location where you can say hey if they’re approved in any country they’re approved here. That is what Prosper is….Our hypothesis is that just by doing that we can leapfrog to a certain extent and it’s got nothing to do with the wild west or doing weird things.

…so here so you can have a drug approved in the UK but not in the US with a doctor licensed in the US but not in the UK with a medical device created in Israel but not yet approved by the FDA following a procedure that has been say innovated in Canada, all of that coming together here in Prospera.

Speeding Up Pharmaceutical Approvals by Recognizing Other Stringent Regulators

New Zealand’s ACT party has proposed that New Zealand speed up pharmaceutical approvals by recognizing the decisions of other stringent regulators, an idea I have long promoted .

The average time for Medsafe to consent an application for a high risk medicine is 630 days. For intermediate risk, it is 661 days and for lower risk it is 830 days8. The average time taken just for processing some lower risk categories is 176-210 days. This is an unacceptable length of time, given there other regulatory bodies replicating that exact same work overseas.

ACT says if a drug or medical device has been approved by any two reputable foreign regulatory bodies (such as Australia, United States, United Kingdom), it should be automatically approved in NZ as well within one week unless Medsafe can show extraordinary reason why it shouldn’t be.

This simple change would significantly improve access to medicines that have already been subject to rigorous testing and analysis through other regulatory regimes.

The ACT party is small but it has some seats and surprisingly the much larger National party is proposing a similar rule:

New Zealand’s slow approval process for medicines means Kiwis wait much longer than people in other countries to access potentially life-saving treatments. While it is essential that medicines and other treatments are subject to stringent scrutiny to ensure they are safe, there is no reason why New Zealanders should have to wait for our domestic medicines regulatory body, Medsafe, to conduct its own cumbersome process from scratch, when countries with health systems we trust have already gone through this exercise.
National will:

…• Require Medsafe to implement even faster approvals processes for any medicines for use in New Zealand that have already been approved by at least two regulatory bodies that we currently recognise, including Australia, the EU, Singapore, the UK, Switzerland and the US.

New Zealand, by the way, already has a reciprocity agreement with the United States for food and it’s mutual–the FDA also recognizes New Zealand as a stringent food regulator–so the idea is not unprecedented.

Moreover, all of this comes on the tail of the UK actually adopting the idea via the “reliance procedure” which recognizes the EU as a stringent regulator and guarantees approval in the UK within 67 days for ay drug approved in the EU.

In the United States, even AOC has flirted with the idea, at least for sunscreens!

Thus, the reciprocity or recognition idea is starting to be adopted.

Hat tip: Eric Crampton who has some further comments.

Infant Formula, Price Controls, and the Misallocation of Resources

For the week of April 3, at least 12 states faced out of stock rates higher than 40 percent, including Connecticut, Delaware, Montana, New Jersey, Rhode IslandI’ve been reluctant to write about the shortage of infant formula simply because it’s so tiring to say the same thing over and over again. Obviously, this is a classic case where the FDA should allow imports of any food or baby formula approved by a stringent authority. (Here’s the US Customs and Border Patrol bragging about how they nabbed 588 cases of infant formula from Germany and the Netherlands as if it were cocaine.) Scott Lincicome has an excellent run down which covers not just the FDA but the problems caused by trade regulation and the WIC program as well.

What I want to do is focus on something less discussed: Why does the shortage vary across the country and even city by city?

I believe one reason is implicit price controls, either due to fear of regulatory backlash, regulatory constraints through other programs, or a misplaced desire not to upset consumers.

Price controls create shortages–that much is well known–but they also create a misallocation of goods. No doubt you have seen pictures from the 1970s of long lines of cars waiting to get gasoline. But there weren’t lineups everywhere at all times–rather we had the strange situation where there were shortage of gasoline in some places while, just a hundred miles away, there was plenty. Or shortages one day and surpluses the next.

Prices rationally allocate goods across space and time in response to shifts in demand and supply. If demand increases in one place, for example, prices rise, creating an incentive to bring in supplies from elsewhere. A rising price signals where supplies are needed and creates an incentive to deliver. Or, as Tyler and I put it, A price is a signal wrapped up in an incentive. A price controlled below the market price creates a shortage and it also kills the signaling and incentive function of prices. The result is allocational chaos: Shortages in some places and times and excess supply in other places and times.

In fact, price controls in a capitalist economy give you a window onto a planned economy. If you think of communism as a system of universal price controls this allocation chaos is the essence of why a communist state cannot rationally allocate resources.

Tyler and I discuss allocational chaos in our chapter on price controls in Modern Principles of Economics. See also this excellent video.

Why Doesn’t the United States Have Test Abundance?!

We have vaccine abundance in the United States but not test abundance. Germany has test abundance. Tests are easily available at the supermarket or the corner store and they are cheap, five tests for 3.75 euro or less than a dollar each. Billiger! In Great Britain you can get a 14 pack for free. The Canadians are also distributing packs of tests to small businesses for free to test their employees.

In the United States, the FDA has approved less than a handful of true at-home tests and, partially as a result, they are expensive at $10 to $20 per test, i.e. more than ten times as expensive as in Germany. Germany has approved over 50 of these tests including tests from American firms not approved in the United States. The rapid tests are excellent for identifying infectiousness and they are an important weapon, alongside vaccines, for controlling viral spread and making gatherings safe but you can’t expect people to use them more than a handful of times at $10 per use.

We ought to have testing abundance in the US and not lag behind Germany, the UK and Canada. As usual, I say if it’s good enough for the Germans it’s good enough for me.

Addendum: The excellent Michael Mina continues to bang the drum.

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Against Regulatory Nationalism

I’ve long argued that if a drug or medical device is approved in another country with a Stringent Regulatory Authority it ought to be approved in the United States. But, of course, the argument is even stronger in the other direction. Drugs and devices approved in the United States ought to be approved elsewhere. Indeed, this is how much of the world actually works because most countries do not have capability to evaluate drugs and devices the way the FDA or say the EMA does. Although it’s the way the world works, few will admit it because that would violate pretensions of regulatory nationalism. Moreover, keeping up with pretenses means transaction costs and unnecessary delays.

The price of such regulatory nationalism can be very high as indicated in this interview with Adar Poonawalla, chief executive of the Serum Institute of India (SII), the world’s largest producer of vaccines.

Some people think the reason that rollout has been slow in many countries is because the developers who hold the patents on the vaccines have licensed too few manufacturers to make them. Do you agree?

No. There are enough manufacturers, it just takes time to scale up. And by the way, I have been blown away by the cooperation between the public and private sectors in the last year, in developing these vaccines. What I find really disappointing, what has added a few months to vaccine delivery – not just ours – is the lack of global regulatory harmonisation. Over the last seven months, while I’ve been busy making vaccines, what have the US, UK and European regulators been doing? How hard would it have been to get together with the World Health Organization and agree that if a vaccine is approved in the half-dozen or so major manufacturing countries, it is approved to send anywhere on the planet?

Instead we have a patchwork of approvals and I have 70m doses that I can’t ship because they have been purchased but not approved. They have a shelf life of six months; these expire in April.

Did you get that? Regulatory nationalism has added months to vaccine delivery and now threatens to put to waste millions of stockpiled doses.

Addendum: See also Scott Sumner on the costs of regulatory nationalism.

Scott Sumner on Vaccine Nationalism

EconLib: Experts in the UK have looked at the AstraZenaca vaccine and found it to be safe and effective. And yet Americans are still not allowed to use the product. So if paternalism is not the actual motive, why do progressives insist that Americans must not be allowed to buy products not approved by the FDA?  What is the actual motive?

The answer is nationalism. The experts who studied the AstraZenaca vaccine were not American experts, they were British experts. Can this form of prejudice be justified on scientific grounds? Obviously not. There has been no double blind, controlled study of comparative expert skill at evaluating vaccines. We have no way of knowing whether the UK decision is wiser than the FDA decision. Instead, the legal prohibition is being done on nationalistic grounds. We are told to blindly accept the incompetence of British experts, without any proof.  (And even if you believed there was solid evidence that one country’s experts were better than another, it would not explain why each developed countries relies on their own experts.  They can’t all be best!)

These debates always end up being like a game of whack-a-mole. Shoot down one argument and regulation proponents will simply put forth another. Their minds are made up.  You say people shouldn’t be allowed to take a vaccine unless experts find it to be safe and effective? OK, the UK experts did just that. You say that only the opinion of US experts counts because our experts are clearly the best? Really, where is the scientific study that shows that our experts are the best? I thought you said we needed to “trust the scientists”?  Now you are saying we must trust the nationalists?

…what’s wrong with the following three-part system of regulation as a compromise solution:

1. FDA approved drugs can be consumed by anyone in America.

2. Drugs approved by any of the top 20 advanced countries (but not the FDA) can be consumed by anyone willing to sign a consent form indicating that they understand the FDA has not approved this product. I’ll sign for AstraZeneca. (The US government puts together a list of 20 reputable countries.)

3. Drugs approved by none of the top 20 developed economies will still be banned.

This is what regulation would look like if paternalism actually were the motivating factor. But it’s not. It’s Trump-style nationalism that motivates progressives to insist that only FDA approved drugs can be sold in America. They may look down their noses at Trump, but they implicitly share his nationalism.

I agree, of course, and have long supported Pharmaceutical Reciprocity.

David Henderson needs a reboot

David is repeatedly writing critiques of my writings on Covid-19.  (Google to them if you wish, they are so off base and misrepresentative I don’t think they deserve a link, and furthermore I find it almost impossible to track down EconLog archives under their new system.)  Virtually all of his points revolve around simple or it seems even willful misunderstandings.  For instance, David wrote:

But he’s willing to sacrifice the well-being of 50 million school-age children. Remember his casual “It just doesn’t seem worth it” remark about allowing kids to go back to school. He handles the tradeoff by not mentioning it.

Here is what I wrote:

…the value of reopening schools. It is an inarguable point, and Sweden seems to have made it work. But schools cannot and should not be reopened unconditionally. Amid high levels of Covid-19, a successful reopening very often will require social distancing, masks and a good system for testing and tracing. It would be better to focus on what needs to be done to make school reopenings work. Reopened schools in Israel, for instance, seem to have contributed to a significant second wave of Covid-19.

And my remark about “It just doesn’t seem worth it”, cited by David as me dismissing school reopenings?  Here is what I actually wrote:

Indoor restaurant dining and drinking, for example, is probably not a good idea in most parts of the U.S. right now.

Yes, many of the Covid cases spread by such activity would be among the lower-risk young, rather than the higher-risk elderly. Still, practically speaking, given America’s current response capabilities, those cases will further paralyze schools and workplaces and entertainment venues. It just doesn’t seem worth it.

I am worried about reopening indoor bars and restaurants because I want to keep schools (and other venues) open.  At my own school, GMU, I very much argued for keeping it open, which indeed we have done with success but also with great effort.  My whole point is one about trade-offs.

I’ve also linked regularly to evidence that school reopenings are often possible and desirable, but still there is a right and wrong way to do it and they are not in every case a good idea.  It is not just up to the policy analyst, you also have to keep the teachers and various other parties on board, whether you like that reality or not.

One issue here is that likely more students would end up in functioning schools under a Tyler Cowen regime than under a David Henderson regime.  David’s sum of recommendations would, in practice, if we were to trace through their full consequences, lead to more schools being shut and more teachers refusing to show up.  And more deaths and panic and overflowing medical facilities.  Now that’s a trade-off.

I could point to numerous misunderstandings in David’s recent posts, pretty much in every paragraph.  (I also think he is quite wrong on substance, allying himself with a few eccentric thinkers that hardly anyone agrees with, and who have not acquitted themselves well in debate, or made good predictions as of late, but that is another matter for a different time.  He should pay greater heed to say Scott Gottlieb, who knows what he is talking about.)

In the meantime, David is failing the ideological Turing test badly and repeatedly.

Addendum: David’s Russian vaccine post does not misunderstand me, but I don’t think it shows a very full grasp of the issue.  I very much favor regulatory reciprocity for pharmaceuticals, vaccines, and more, but I strongly believe adding Russia to the reciprocal list would “poison the well” and doom the whole idea.  In the meantime, they are not nearly as far along for a major vaccine rollout as they claim, so probably we are not missing out on very much, even if the quality were fine.  The slightest problem with the vaccine would be blown out of proportion, most of all with DT as president and Russian conspiracy theories circulating.  If your goal is to nudge and push the FDA to move more quickly across the board, starting them off with the approval of a Russian vaccine is bad tactics and is risking the entire apple cart.  Maybe try for Mother England first?  So I think David here is quite wrong, and applying market liberalization ideas in a knee-jerk rather than a sophisticated fashion.  He called the post “Tyler Cowen’s shocking post on the Russian vaccine,” but I wonder who he thinks is really supposed to be shocked by that one.  If you read David’s comment on his own post you will see he is genuinely unable to imagine that such an argument as I present above might exist.

New addendum: Note that one of the earlier comments was under the name of David Henderson but was not in fact by him, read here.  And a response by the real DRH here.

Occupational Licensing Reduces Mobility

Brookings has a good memo on four ways occupational licensing reduces both income and geographic mobility. Here is point 1:

Since state licensing laws vary widely, a license earned in one state may not be honored in another. In South Carolina, only 12 percent of the workforce is licensed, versus 33 percent in Iowa. In Iowa, it takes 16 months of education to become a cosmetologist, but just half that long in New York. This licensing patchwork might explain why those working in licensed professions are much less likely to move, especially across state lines:

mobility-and-occ-licThe graph, is from the excellent White House report on occupational licensing. The first blue column says that workers in heavily licensed occupations are nearly 15% less likely to move between states than those in less licensed occupations–this is true even after controlling for a number of other variables that might differ across occupations and also influence mobility such as citizenship, sex, number of children, and education.

The orange column provides another test. An occupational license makes it difficult to move across states but not within a state. If workers in licensed occupations had lower rates of mobility for some other reason than the license then we would expect that workers in heavily licensed occupations would also have lower rates of within state mobility. The orange bars show that workers in heavily licensed occupations do have slightly lower rates of within state mobility but not by nearly enough to explain the dramatically lower rates of between state mobility.

Lower rates of worker mobility mean that workers are misallocated across the states in a similar way that price controls or discrimination misallocate resources and reduce total wealth. Lower rates of workforce mobility also increase the persistence of unemployment.

To its credit, the Federal government is investing in efforts to make licenses more portable including encouraging “cross-State licensing reciprocity agreements to accept each other’s licenses.” Cross-state reciprocity agreements sound like an excellent idea.

Generic Drug Regulation and Pharmaceutical Price-Jacking

The drug Daraprim was increased in price from $13.60 to $750 creating social outrage. I’ve been busy but a few points are worth mentioning. The drug is not under patent so this isn’t a case of IP protectionism. The story as I read it is that Martin Shkreli, the controversial CEO of Turing pharmaceuticals, noticed that there was only one producer of Daraprim in the United States and, knowing that it’s costly to obtain even an abbreviated FDA approval to sell a generic drug, saw that he could greatly increase the price.

It’s easy to see that this issue is almost entirely about the difficulty of obtaining generic drug approval in the United States because there are many suppliers in India and prices are incredibly cheap. The prices in this list are in India rupees. 7 rupees is about 10 cents so the list is telling us that a single pill costs about 5 cents in India compared to $750 in the United States!

drugs India

It is true that there are real issues with the quality of Indian generics. But Pyrimethamine is also widely available in Europe. I’ve long argued for reciprocity, if a drug is approved in Europe it ought to be approved here. In this case, the logic is absurdly strong. The drug is already approved here! All that we would be doing is allowing import of any generic approved as such in Europe to be sold in the United States.

Note that this is not a case of reimportation of a patented pharmaceutical for which there are real questions about the effect on innovation.

Allowing importation of any generic approved for sale in Europe would also solve the issue of so-called closed distribution.

There is no reason why the United States cannot have as vigorous a market in generic pharmaceuticals as does India.

Hat tip: Gordon Hanson.

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